July jobs report confirms weak pace of jobless economic “recovery”

The Labor Department released July’s employment figures today and once again there is little good news. According to the report the economy added 163,000 jobs last month even though the unemployment rate ratcheted up slightly to 8.3 percent. The number of additional jobs is mediocre by any other name, but the figure is double the jobs added in June and exceeded Wall Street’s doom-and-gloom forecast. This tarnished silver-lining was enough to provide the Obama administration with some spin traction by claiming that the “pace” of job growth is picking up.

Alan B. Krueger, the chairman of President Obama’s Council of Economic Advisers, said that Obama’s jobs plan would help those economic sectors that are struggling the most during this jobless recession, namely, public sector employees and construction workers.

“If you look at today’s jobs report, where we saw declines were construction and government education jobs,” said Krueger. “The main components of the Jobs Act would target exactly those two areas, by investing more in infrastructure and helping local governments keep teachers and first responders on the payrolls. I think it’s the kind of medicine that’s well targeted to the continuing areas of weakness in the job market.”

The devil is in the details, of course, and today’s report also provided Republicans with ammunition for their nauseatingly familiar mantra:  less government, less regulation, and less taxes means more investment by the private sector. Mitt Romney, the Republican presidential nominee, rehearsed the same tired lyrics Republicans have been singing for decades, laying the blame for America’s economic woes at the feet of the man who inherited the mess three years ago.

“This is an extraordinary record of failure. The president’s policies have not worked because he thinks government makes America work. He’s wrong,” Romney bleated.

Never mind that Obama has spent his first term cleaning up the mess left in the wake of Republican economic policy during the two terms that they controlled both the White House and Congress. Never mind the surpluses left by Clinton that Bush squandered. Never mind that the largest expansion of government spending since the New Deal was brought on by two wars and an expansion of Medicare. Never mind that the Republicans irrational fear of taxes has a created a climate in which it is impossible to govern because revenues are hamstrung by unaffordable tax cuts they want to keep extending into infinity. No, never mind the facts.

Admittedly, Obama’s economic policy has been less than admirable. Under Treasury Secretary Tim Geithner, many of the same Wall Street-favoring features of the Bush years have continued:  bail outs for irresponsible (indeed, criminal) investment banks, failure to regulate volatile markets like derivatives where trading smoke-and-mirrors continues with no accountability, failure to regulate investment bank shenanigans, and an ineffective response to Republican rhetorical nonsense on taxes.

Nevertheless, it is doubtful that an economy as large and complex (and corrupt!) as America’s can be turned around on a dime, let alone a single term, so Romney’s exhortations ring as hollow as the Republican economic fantasy that markets can do everything if we just leave powerful private actors to do as they please.

Barclays scandal spreads to US banks, regulators, and politicians

As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity

Political officials in London and Washington this week are questioning whether regulators allowed banks to report false interest rates that precipitated the 2008 financial collapse. On Monday, Congress requested information about the role of the Federal Reserve Bank of New York in failing to properly regulate bank interest rates. The Senate Banking Committee on Tuesday also announced it was looking into the issue.

The new focus on regulators, banks, and other financial institutions such as credit rating agencies has intensified in the last two weeks after the British bank Barclays agreed to pay $450 million to resolve a civil case after it was discovered it had been manipulating key interest rates. Regulators accused the bank of improperly influencing these rates to deflect concerns about its capital backing and financial viability.

The Barclays settlement is the first of its kind stemming from an ongoing investigation into the question whether banks set key benchmarks, including Libor, or the London interbank offered rate. Other countries are considering action against more than ten large banks, including JPMorgan and Citigroup. The banks also face civil litigation from cities, investors, and financial firms that contend they lost billions from the misreporting of these key interest rates. Such lawsuits could end up costing the banking industry tens of billions of dollars.

The House Financial Services Committee sent a letter to the New York Fed on Monday seeking transcripts from dozens of phone calls in 2007 and 2008 that took place between central bank officials and executives at Barclays. Among the officials that the Senate Banking Committee plans to question during hearings this month include Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner, who ran the New York Fed during the crisis. Geithner has long been criticized by opponents on both the left and right as an insider to the financial mess who has allowed key players off the hook.

The attempt by political officials to reign in financial manipulation by large firms and create more regulation has been hampered by political corruption during a presidential election year where multiple and conflicting constituencies must be satisfied. The Obama administration in particular has been lax to regulate the financial industry, in part, because Wall Street donors were one of President Obama’s largest contributors in the 2008 election.